Want To Pay Off Your PMI (Private Mortgage Insurance)? Here’s How to Do It FAST, The Right Way
What is private mortgage insurance? Commonly abbreviated as PMI, you might have heard this term many times, but not known what it is. Private mortgage insurance is a monthly expense that is added onto mortgages for house purchases where the buyer put down less than 20 percent for the house. What PMI does it protects the bank lender in case you stop paying your bills, and they have to sell your house.
Pay Down Your Mortgage
This is the slowest method of paying off PMI, but sometimes it may be your only option. Obviously, you begin this method by paying your bills on time. The idea is that your LTV will decrease (your loan to value ratio). When this happens, you can call the bank and ask them about removing PMI from your mortgage bill. Clearly, this will take more than overnight. See: Avoiding PMI – Can it Be Done? – Quicken Loans.
If you didn’t put any money on the house down at all, you’re going to be waiting a very long time for the standard homeowner to get rid of PMI, unless they suddenly come into a large inheritance in the very near future, which is unlikely for most of us. Your goal right now should be getting to twenty percent equity in your house, because this is how much lenders require before they are able to lift your PMI. Of course, if you want to pay it off faster, try to make at least one extra payment each year, or putting any extra cash toward extra payments. Read on: 6 Reasons to Avoid Private Mortgage Insurance – Investopedia.
Add some value to your house!
You can expect to shell out some cash in this method. However, adding value to your house with renovations is one way to help decrease your LTV ratio. Not every type of home remodel adds lots of value, however, so know that. Many renovations, you’ll be lucky if you break even. If you do upgrade, do the kitchen or bathroom. Don’t go overboard. However, you’ll likely make a profit by adding new doors, or fire pits, or something of the sort. Appraisers like to see “special additions” when they appraise.
Perhaps the value of your neighborhood will increase, if you’re lucky. Then, your home increases in value without you doing a thing! One you reach 80% or under on your home in terms of your LTV, you can then call your lender and request that they remove the PMI. They will review your payment history, and current credit score, along with a number of other factors, and then let you know. Be sure to send a report of your updated appraisal. Legally, if your LTV is 80% or under, the bank has to remove your PMI. See: PMI – What is Private Mortgage Insurance? – Zillow.